Like Skedog, I installed Virtual CloneDrive, fired it up and then realized I didn't have an ISO file to browse to. In case it isn't clear to others, it is a 2 step process:
1) create an ISO image of your CD - this is a single file you create on your hard disk - this is a one-time process
2) then use a program to "mount" the ISO file on a virtual drive each time you want to play a game without the CD
Some programs will do both (I think Alcohol and Daemon Tools will). But if you want to avoid Daemon Tools and want freeware you'll probably have to use 2 separate programs.
For step 1, I found
ISO Recorder which is freeware. I think this would be a good program for most people. In my case, I have an old halo CD which is very scratchy, and it wouldn't read my CD (yikes!). I tried Alcohol 52%, which has a trial version, and it worked, but only when I checked two boxes: "skip reading errors" and "fast skip error blocks". Not sure if those errors are due to scratchy disk or copyprotection of some kind. But I successfully created an ISO file. So try the free one first, and if it doesn't work I guess use the Alcohol trial.
To mount the ISO I decided to use Virtual CloneDrive (see Mxy's post for link).
The complete steps would be something like this:
1) Install ISO Recorder or Alcohol
2) Insert Halo CD into drive (duh)
3) Create a folder somewhere to store all your ISO files for any games you intend to make - C:\Files\ISO or whatever
4a) For Alcohol, start up the program, then use the "Image Making Wizard". Select the CD drive, click next, then select Standard ISO image format, and also set the destination folder that you created in step 3
4b) For ISO Recorder you can go to My Computer or Windows Explorer and right click on the CD drive (D: or whatever) and there should be an option "create image from CD" - again you would select ISO as the format and set the location to the folder where you want to save.
You should be able to create an ISO file from the above steps.
To use the ISO:
1) Take the Halo CD out of the drive (so you can make sure it's worked!)
2) Install Virtual CloneDrive
3) When installed, if you go to My Computer, you should see a cute little Sheep icon. If you right-click on that, select Mount, then browse to your ISO file you've created.
4) The sheep icon will get replaced with the familar masterchief icon, and you can now start up halo and it should work!
That is about everything I know, but if you have problems feel free to PM me.